What beta is assigned to a pharmaceutical company that is developing a drug but has none on the market?

Assigning a beta of 0 to a pharmaceutical company that is developing a drug but has none currently on the market is appropriate because beta measures the sensitivity of a company's stock returns relative to the overall market's returns. A company with no products on the market typically has no predictable revenue or established market behavior that would correlate with market movements. Therefore, it can be considered as having no market risk at this stage since it does not have an operational business that is exposed to market fluctuations.

Having no established drugs means that the company is in a pre-revenue stage, and its risk profile is largely uncertain and speculative, dominated by R&D risks rather than market risks. Because the company does not have any existing sales or market performance to analyze, it cannot be assigned a positive beta that indicates correlation with market performance.

In contrast, a beta of 1 signifies that the company's stock moves in line with the market, while a beta of 0.5 indicates lower volatility compared to the market; neither of those is suitable for a company in early-stage drug development without any marketed products. A beta of 2 would suggest a stock that is highly volatile, moving significantly more than the market, which does not apply to a company without established operations. Thus, recognizing